U.S. stocks fell sharply Friday, cutting into weekly gains, after September jobs data showed an unexpected fall in the unemployment rate that’s expected to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.
Investors were also weighing a profit warning at a leading microchip maker.
The Dow Jones Industrial Average
fell 320 points, or 1.1%, to 29,606.
The S&P 500
dropped 47 points, or 1.2%, to 3,698.
The Nasdaq Composite
shed 189 points, or 1.7%, to 10,884.
Stocks were on track for back-to-back losses but were still headed for solid weekly gains, with the Dow and S&P 500 each up around 3% and the Nasdaq up 2.8%.
What’s driving markets
The Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.
“It’s becoming more and more evident the labor market is playing a critical role in today’s inflation battle,” said Steve Rick, chief economist at CUNA Mutual Group, in a note. “If unemployment remains low, employers will increase wages to attract talent, creating more disposable income. Increased purchasing power will then lead to increased demand for goods and services, spiking prices and potentially causing the Fed to raise rates even more.”
Federal Reserve Gov. Christopher Waller late on Thursday said he doesn’t expect the jobs report to change anyone’s thinking at the central bank. “A jobs number [around 260,000] along with the job openings rate reported on Tuesday would show that the labor market is slowing a bit but is still quite tight. As a result, I don’t expect tomorrow’s jobs report to alter my view that we should be focused 100% on reducing inflation,” he said.
Of course, it’s in the Fed’s interest not to signal a pivot in policy until it’s ready to make one, given its belief that keeping financial conditions tight will help to reduce inflation. New York Fed President John Williams will have the opportunity to comment on the data when he speaks at 10 a.m. ET.
Besides the jobs report, investors will weigh a profit warning from microchip maker AMD
which said the PC market weakened significantly during the quarter. AMD shares fell 5% in premarket trade, and rivals including Nvidia
also were lower.
The PHLX semiconductor index
has dropped 36% this year.